Bottom line:  Dow Jones seems to be carving a lower top and the price zone could be around 22700/800 levels. Bears are looking determined to print yet another low below 18200 going forward.

Technical Analysis:

Dow Jones has been producing a counter trend rally since 18200 lows and is expected to resume lower shortly. The indice could be facing resistance around 22800 levels if prices manage to reach there. A bearish resumption from those levels could drag prices lower below 18200 levels, and complete a 5 wave drop that begun from 29600 levels.

The corrective wave has retraced up to fibonacci 50% of the recent bearish drop between 27000 and 18000 levels respectively. A push through 22700/800 levels would be considered ideal for a bearish reversal since it is also close to the price resistance at 23121, the March 13 highs.

The wave structure remains bearish until 27000 highs remain intact. Furthermore, a drop below the 19500 levels would confirm that a lower top is in place at recent swing highs, just below 22700 mark. Please note if bulls are able to break above 25223 intermediary resistance, it would threaten the existing bearish scenario.

Most traders might be willing to initiate fresh short positions around 22700/800 levels if prices reach there. A protective stop might be placed just above 25223 and projected targets comfortable below 18200 levels respectively.

Alternately, if the drop from 29600 levels is complete at 18200 levels, Dow Jones rally could exceed beyond 25200 levels and up to 27000 going forward. This would confirm that the above drop was corrective and bulls are now poised to print higher highs and higher lows.

Overall, Dow Jones is expected to face resistance around 22700/800 levels which is 50% fibonacci retracement of recent drop. Watch out for a bearish reversal then.

Prepared by

Harsh Japee, Technical Analyst.

Dow Jones Chart

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